China’s currency just hit a four-year low against the dollar as the country moved to devalue for a second day running. And there could be further to fall, according to analysts from Credit Suisse.
China aimed for an exchange rate of 6.33 to the dollar today. Credit Suisse sees the bottom at 6.5, with the Chinese government announcing a series of cuts to get there.
Here’s what the double China devaluation is doing to the market:
Here are the main points from Credit Suisse:
- we now project a few days of substantial devaluation, followed by a strong statement by the authority that the CNY has reached its fair-value based on a trade-weighted basket.
- we are inclined to believe that Beijing may draw a line at around the 6.5 level.
- bad news for Asian assets and commodities, but that is what Beijing wants — moving a few steps away from the USD in a time of Fed tightening
- The Chinese unit had been known as a steady and appreciation-biased currency over the past decade. That perception seems to be changing, affecting asset prices that were perceived similar to the China of the above said factor